Liquidity
It is clear that both liquidity ratios have decrease significantly in 2016 but increased in 2017. As the company is in the pharma trade, and trade receivables are significant, it would appear that most of its sales on credit, with little sales are for cash.
However the present levels of 1.97 and 1.36 respectively in 2017 shows hikma is not in a good liquidity position.
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Solvency
The higher the gearing ratios, the higher the debt level of the company. The leverage in 2015 of 54% reduced to 35% in 2016 and increased to 51% in 2017.
However, too much borrowing increases the risk of the company not being able to meet its repayments as they fall due. The interest cover shows how much profit would be lost before hikma can’t cover its payment on interest. A high interest cover value is better. Now, looking at the interest cover of 6.5 in 2015 which decrease to 3.9 in 2016 and to a negative value of -12.9 in 2017, which currently shows hikma is in danger of not being able to pay its interest payment.
